Bundling by Competitors and the Sharing of Profits

Victor Ginsburgh and Israel Zang

Economics Bulletin, 2007, vol. 12, issue 16, 1-9

Abstract: We discuss the effects of bundling two goods offered by two symmetric firms. This situation requires the use of some sharing rule for the profits from the sales of the bundle. We show that the choice of this rule may have substantial effects on prices and profits – even if the possible rules eventually yield equal shares. In particular, the use of the a priori equal sharing rule yields lower prices and profits, than a price weighted sharing rule. When competitors bundle, they can implicitly cooperate via the setting of the profit sharing rule and increase their profits at the expense of consumers. This issue calls for some further attention by regulators.

JEL-codes: L0 L1 (search for similar items in EconPapers)
Date: 2007-08-22
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Bundling by competitors and the sharing of profits (2007)
Working Paper: Bundling by competitors and the sharing of profits (2005)
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